Covus Corporation Pty Ltd v A J Lucas Drilling Pty Ltd
[2006] WASC 154
•1 AUGUST 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: COVUS CORPORATION PTY LTD -v- A J LUCAS DRILLING PTY LTD [2006] WASC 154
CORAM: BLAXELL J
HEARD: 10 MAY 2006
DELIVERED : 1 AUGUST 2006
FILE NO/S: CIV 1833 of 2003
BETWEEN: COVUS CORPORATION PTY LTD
Plaintiff
AND
A J LUCAS DRILLING PTY LTD
DefendantBHP BILLITON PETROLEUM PTY LTD
Third Party
Catchwords:
Practice and procedure - Cross-vesting - Transfer of proceedings to another court - Application to transfer third party proceedings to Supreme Court of Victoria - Related proceedings in Victoria - Whether or not it is "more appropriate" that the third party proceedings be determined in Victoria
Legislation:
Jurisdiction of Courts (Cross-vesting) Act 1987 (WA), s 5(2)
Result:
Order for transfer of proceedings
Category: B
Representation:
Counsel:
Plaintiff: Mr D B Shaw
Defendant: Mr T L Lee & Ms M M N Byrne
Third Party : Mr P D Quinlan
Solicitors:
Plaintiff: Shaw & Associates
Defendant: Terence Lockyer Lee & Associates
Third Party : Allens Arthur Robinson
Case(s) referred to in judgment(s):
Bankinvest AG v Seabrook (1988) 14 NSWLR 711
BHP Billiton Ltd v Schultz & Ors (2004) 221 CLR 400
Mullins Investments Pty Ltd v Elliott Exploration Co Pty Ltd (1989) 1 WAR 531
Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460
Case(s) also cited:
ABB Power Generation Ltd v Chapple & Ors [2001] WASCA 412; (2001) 25 WAR 158
Amaca Pty Ltd v Harris [2005] NSWSC 622
AMP Fire and General Insurance Co Ltd v Dixon [1982] VR 833
Anderson Formrite Pty Ltd v Baulderstone Hornibrook Pty Ltd [2004] WASC 115
Bailey (By his next friend the Public Trustee) v Climaze Holdings Pty Ltd, unreported, SCt of WA; Library No 980455; 12 August 1998
Central Bore Nickel NL v Richfile Pty Ltd (1995) 16 WAR 230
Chatsworth Investments Ltd v Amoco (UK) [1968] 1 Ch 665
Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122
Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208
Harper v Gray & Walker [1985] 1 WLR 1196
Jackson v John Fairfax & Sons Ltd (1988) 96 FLR 145
Port of Melbourne Authority v Anshum Pty Ltd (1981) 147 CLR 589
Stott v West Yorkshire Road Car Co Ltd [1971] 2 QB 651
Wright v Blackall & Ors [2005] QSC 142
BLAXELL J: This is an application by the third party to transfer the third party proceedings to the Supreme Court of Victoria. The third party claim involves issues which are common to proceedings in that other Court, and the third party contends that it is more appropriate, and in the interests of justice, that the claim be determined in that jurisdiction.
The application is made under s 5(2) of the Jurisdiction of Courts (Cross‑vesting) Act 1987 (WA) ("the Act") which relevantly provides that:
"(2) Where ‑
(a)a proceeding (in this subsection referred to as the 'relevant proceeding') is pending in the Supreme Court (in this subsection referred to as the 'first court'); and
(b)it appears to the first court that ‑
(i)the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of another State or of a Territory and it is more appropriate that the relevant proceeding be determined by that other Supreme Court;
... or
(iii)it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory,
the first court shall transfer the relevant proceeding to that other Supreme Court."
The background to the proceedings
The affidavits before me show that the third party ("BHPB") is the major joint venturer in the Minerva gas field development off the coast of Victoria ("the Minerva Project"). At all material times the Minerva Project involved the drilling of two wells with sub sea pipelines to an onshore facility. The development was environmentally sensitive, and it was a government requirement that the two pipelines come ashore beneath the seabed and shoreline.
As part of the Minerva Project, a series of contracts were entered into by BHPB and other parties. In particular:
-On 4 April 2002 BHPB and others entered into a contract with McConnell Dowell Constructors (Aust) Pty Ltd ("McDow") and a Portuguese company known as "Saipem" for the design and construction of the offshore and onshore gas pipelines and plant ("the LSTK contract").
-On 26 June 2002 McDow, in turn, entered into a subcontract with the defendant ("Lucas") for the latter to design and carry out horizontal directional drilling of gas pipeline holes exiting from beneath the seabed to the onshore facility ("the Lucas subcontract").
-On 27 November 2002, Lucas, in turn, engaged the plaintiff ("Covus") to carry out certain diving, underwater engineering, and marine work in connection with the horizontal directional drilling operation.
The LSTK contract was valued at approximately $170,000,000, and all work associated with it was substantially carried out on or off the coast of Victoria. Both the LSTK contract and the Lucas subcontract were governed by the law of Victoria.
There is an issue between Covus and Lucas as to whether or not the former's services were performed pursuant to a valid and enforceable contract between those parties. Lucas contends that there was such a contract and that it was subject to a term that Covus would only be paid for its services if Lucas had itself received payment for the same from McDow.
Work duly commenced offshore pursuant to the LSTK contract and the various subcontracts. However problems were encountered with the horizontal directional drilling, and work was suspended during March 2003.
Over the following two months there were discussions and negotiations amongst all concerned as to how the horizontal directional drilling could be re‑engineered. Work recommenced on 1 June 2003 but ceased again on 8 September 2003 when BHPB gave notice terminating the LSTK contract. (The validity of that notice of termination is an issue in the Victorian proceedings.) On 16 September 2003 McDow in turn gave notice terminating the Lucas subcontract.
At all material times Covus provided underwater and marine services as requested by Lucas (or as Lucas contends, in accordance with the contract between those parties). There is no issue as to the adequacy or standard of those services and it is not alleged that Covus was in any way in default.
Covus received payment for some of its work up until March 2003. However, there are outstanding payments totalling approximately $450,000, which sum is the subject of the claim in the present action.
The proceedings in this Court to date
On 14 July 2003 Covus commenced the present action claiming restitutionary relief by reason of Lucas having received the benefit of its services without making payment for the same. By its defence Lucas denies the claim and alleges that there was a valid and enforceable contract between the parties whereby Covus would only receive payment upon Lucas itself being paid by McDow.
Lucas further pleads that it paid to Covus a total of $466,239 by mistake. It contends that Covus would be unjustly enriched if it was to retain those payments and therefore counterclaims for that sum.
On 21 October 2003 Lucas joined BHPB, Saipem, and McDow as third parties to the action. The proceedings against the second and third of those third parties were subsequently discontinued, and up until October 2005 Lucas was also indicating that the third party claim against BHPB had been settled. Consequently the court did not make any third party directions and did not require BHPB's attendance at a mediation conference held between Covus and Lucas on 14 October 2005. However, in November 2005, Lucas gave notice to Covus that it intended to pursue the third party claim against BHPB.
The statement of claim in the third party proceedings was not filed until 21 February 2006. It recites the history of the contractual arrangements between the parties and claims that Lucas was not paid for any of the work it has done on the Minerva project. It makes a restitutionary claim on the basis that it would be unjust to Lucas, and BHPB would be unjustly enriched, if Lucas was not paid its reasonable remuneration for the work done. The prayer for relief claims the following:
"AAn indemnity from the Third Party in relation to any amount which is found to be payable by the Defendant to the Plaintiff (Covus Amount).
BIts reasonable remuneration in relation to the Work and the Revised Work less the Covus Amount.
CFurther or other costs."
It should be noted (as acknowledged by Lucas' counsel) that the statement of claim does not seem to plead any facts which would ground the claim for an indemnity. Nor is there any particularisation or indication of the amount said to be Lucas' "reasonable remuneration".
The proceedings in the Supreme Court of Victoria
On 9 March 2004 McDow commenced proceedings in the Supreme Court of Victoria against BHPB and its fellow joint venturers in the Minerva project ("the BHPB parties"). McDow's claim in that action (No 4915 of 2004) is essentially that:
(a)The LSTK contract is void for uncertainty with the consequence that McDow is entitled to a fair and reasonable amount for work done and materials supplied;
(b)further or alternatively, McDow is entitled to relief under the Trade Practices Act 1975 (Cth) by reason of the BHPB parties' contravention of s 52 of that Act; and
(c)alternatively to (a) above, McDow is entitled to relief for alleged wrongful termination of the LSTK contract.
The amount claimed by McDow by way of restitution totals $39,388,320 after allowing for $27,124,000 already paid by the BHPB parties. The moneys claimed include the following component:
"Claim by Lucas - $14,868,000"
In their defence to McDow's claim, the BHPB parties allege that there were numerous breaches of the LTSK contract which entitled them to validly terminate the same. A substantial proportion of those alleged breaches is said to involve that part of the works carried out by Lucas including:
-failures to comply with health and safety obligations;
-carrying out the works in a defective manner; and
-performing works in a manner which caused delay to the Minerva project.
If the BHPB parties are correct in these contentions, it will mean that defaults by Lucas will have provided the basis for much of the defence to McDow's claim.
The BHPB parties have also counterclaimed for damages against McDow, Saipem and the parent companies of those two entities. Although there are a total of seven parties to the Victorian proceedings, I am informed from the Bar table that there will be only three sets of counsel at trial.
I understand that the Victorian proceedings have reached a stage that discovery is complete and the parties are about the exchange witness statements. The proceedings have been set down for a six month trial which is scheduled to commence on 27 February 2007.
The principles to be applied to the present application
Prior to the decision of the High Court in BHP Billiton Ltd v Schultz & Ors (2004) 221 CLR 400, there was some divergence in the authorities as to the correct approach to be taken to an application for transfer of proceedings under s 5(2) of the Act.
In Bankinvest AG v Seabrook (1988) 14 NSWLR 711, the New South Wales Court of Appeal held that the traditional principles of forum non conveniens had no part to play. The court specifically rejected the proposition that the party seeking a transfer bore an onus to displace the entitlement of the plaintiff to the exercise of a jurisdiction which had been properly invoked. At 727, Rogers A‑JA held:
"In my view, this approach should be firmly rejected. If accepted, it would entrench the concept of one Australian jurisdiction being 'foreign' to another. No allowance would be made for the fact that the Australian States are a federation. Most relevantly, the purpose of the legislation would be lost. The cross‑vesting legislation does not call for this approach. Indeed, it positively rejects it. The only lodestar that a judge may steer by is, what do the interests of justice dictate should be done?
...
Even if, ultimately, the accepted test for forum non conveniens, in relation to non‑Australian venues, should remain the 'traditional approach', ... the Australian Parliaments have prescribed different criteria for determining a place for hearing within Australia."
In this State, Ipp J in Mullins Investments Pty Ltd v Elliott Exploration Co Pty Ltd (1989) 1 WAR 531 expressly disagreed with the decision in Bankinvest and held that the ordinary rules of private international law applied in appropriate instances to proceedings under the Act. Subsequently, there were a number of other decisions in this State which followed the approach taken in Mullins.
However, in BHP Billiton Ltd v Schultz (supra) the majority of the High Court held (at [14]) that:
"In the context of the Cross‑vesting Act, one is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather, the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice. An application for transfer under s 5 of the Cross‑vesting Act is brought upon the hypothesis that the jurisdiction of the court to which the application is made has been regularly invoked. If it appears to that court that it is in the interests of justice that the proceedings be determined by another designated court, then the first court 'shall transfer' the proceedings to that other court. There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a 'clearly inappropriate' forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate."
The majority went on (at [22] and [25]) to specifically approve the decision in Bankinvest.
Bankinvest (at 728) is also authority for the proposition that when determining an application for transfer it is relevant to consider whether the second court is the "natural forum" as described by Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 478, namely:
" ... being 'that with which the action had the most real and substantial connection'. So it is for connecting factors in this sense that the court must first look; and these will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction ... and the places where the parties respectively reside or carry on business."
Needless to say, and as stated by the majority in BHP Billiton Ltd v Schultz (supra) at [19]:
"In many cases, there will be such a preponderance of connecting factors with one forum that it can readily be identified as the most appropriate, or natural, forum. In other cases, there might be significant connecting factors with each of the two different forums. Some of the factors might cancel each other out."
If, pursuant to s 5(2), it appears to the first court that the other jurisdiction is "more appropriate", there is no discretion to refuse a transfer of proceedings. The obligation placed by the Act on the first court is that it "shall transfer" the relevant proceeding to that other Supreme Court.
Whether there should be a transfer of proceedings in the present instance
Quite obviously there are some very substantial factors which connect the third party claim in the present proceedings with the related proceedings in the Supreme Court of Victoria. The work the subject of the claim was carried out in Victoria, and the question of whether or not it was performed pursuant to valid and binding contractual relationships is governed by the law of that State. Furthermore, the fact and context of these contractual arrangements is relevant to the claim for unjust enrichment.
It is also significant that the "reasonable remuneration" claimed by Lucas in the present proceedings is also claimed by McDow in the Victorian proceedings. An attempt has been made to differentiate the two claims on the basis that McDow seeks payment of $14,868,000 in respect of the "claim by Lucas", whereas the quantum of the present third party claim is said (by Lucas' counsel) to be limited to "$7.5 million or thereabouts".
It is difficult to afford this assertion much credence given that it has not been pleaded or particularised in the third party statement of claim, and is not confirmed by Mr A S Campbell (the chairman and chief executive officer of Lucas) in his affidavit opposing the application. Mr Campbell also fails to contradict evidence that during his address to the 2004 annual general meeting of his company he stated that McDow's claim against BHPB for "the Lucas HDD portion of its works" was comparable with "an assessment by an independent consultant retained by Lucas, who has certified claims totalling $14.6 million under the Lucas subcontract".
Lucas also contends that the third party proceedings have a greater connection with New South Wales than Victoria, because it was in the former State that there were discussions between the parties and a request by BHPB that the relevant work be performed. Assuming for present purposes that this assertion is correct, it cannot impact upon the outcome of the application given that the present issue is limited to the question of whether or not it is more appropriate that the present proceedings be determined in the Supreme Court of Victoria rather than in this Court.
There is only one factor which connects Lucas' claim against BHPB with Western Australia, namely that it was in this State that Covus commenced the prior action claiming approximately $450,000 plus interest. The only substantial issue in the present action is whether or not Covus' work was performed under a contract containing a term that it would not receive payment until Lucas was paid. That is obviously a very simple issue which has little if any overlap with the issues in the third party claim. The quantum claimed by Covus is also relatively small when compared to the very significant sum claimed by Lucas against BHPB.
Lucas nevertheless submits that it would be unjust to separate the third party claim from the principal proceedings and to transfer it to Victoria. In this regard it is said that "it is not open to [Lucas] to first litigate the indemnity sought from the third party in initial proceedings, and then in later proceedings to seek the remainder of its relief against the third party" (par 5 of the defendant's written submissions).
This submission overlooks the fact that the application seeks to transfer the whole of the third party claim to Victoria. Accordingly, if the application is granted, it will not only be Lucas' claim for reasonable remuneration that will be determined there, but also its claim for an indemnity or reimbursement of any moneys payable to Covus.
It is significant that Lucas has not pleaded any facts which support the claim for an indemnity; and even if it did, it is difficult to see how the issue in the principal action could in any way impact on that claim. The only potential injustice to Lucas if the application is granted is that it may be forced to meet a judgment in favour of Covus before litigating its claim to an indemnity.
Lucas also points out that a transfer of the third party proceedings would probably result in it being joined as a party to the proceedings in that State. This being so, Lucas would then become an "unwilling participant" in those proceedings and would be immersed in a six month long trial. Accordingly, it is said that the likely cost and inconvenience to Lucas would be "enormous".
In assessing the validity of these concerns it is relevant to note that when first given notice of the present application, Lucas was willing to consent to the proposed transfer provided that the claim brought by Covus was also transferred (par 46 of the affidavit of Trudy Nicole Steedman sworn 10 April 2006). It is also fair to observe that any litigation involving a claim for reasonable remuneration of between $7.5 million and $14.8 million is likely to involve considerable inconvenience and expense. In any event, it can be expected that the trial in the Supreme Court of Victoria will be managed in such a way as to ensure maximum efficiency and to avoid unnecessary expense.
In the end, the question to be determined is whether it is "more appropriate" that Lucas' claim against BHPB be determined by the Supreme Court of Victoria. In my view that question must be answered in the affirmative for the stated reasons which are manifestly overwhelming.
Accordingly, and as required by s 5(2) of the Act, I order that the proceedings on the third party claim in the present action should be transferred to the Supreme Court of Victoria.
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